When 20 of Bank of America’s top executives met in the US last month to discuss the company’s strategy, the burning issue high on the agenda was how to turn round its stuttering investment banking operation.
During a record M&A boom that has lifted most of Wall Street’s biggest names, BofA has lost market share, missed out on millions of dollars in fees and watched on as more thinly staffed rivals vaulted it in industry league table rankings this year.
The drop-off in performance is stark. In 2017, BofA’s US and Canada M&A team brought in $939m of revenues, putting them in fourth position with a 6.1 per cent market share, according to internal bank data seen by the Financial Times.
So far this year, the team has generated less than half that amount and is on track to finish in seventh place with a 4 per cent share, below the other four big Wall Street banks as well as two smaller rivals, Jefferies and Barclays.
The decline has attracted the attention of Brian Moynihan, the bank’s chairman and chief executive, who has spent the past few months urging his M&A department to improve, according to four insiders who spoke to the Financial Times.
The team knows they can do a better job and are after it
Mr Moynihan has charged Matthew Koder, an intense Australian who previously ran BofA’s Asia-Pacific operations, with turning around the unit, prompting insiders to predict a significant shake-up after he takes over in January.
Fond of military-style “boot camp” workouts and boxing, Mr Koder has been known to perform one-armed push-ups for colleagues when out socially, people who’ve worked with him said.
“It’s about upping the intensity and winning more deals, frankly we should be top three in everything, that’s what Matthew’s thrust will be,” said a person familiar with the decision.
“The team knows they can do a better job and are after it,” Mr Moynihan, who has typically concentrated on other divisions, said on a call with investors in July. The unit’s performance will again be under scrutiny when BofA reports results on Monday.
The criticism goes to the heart of a decade-long conundrum for BofA — following its crisis-era takeover of Merrill Lynch — over how heavily to build on its core Main Street business of lending to corporates and consumers by expanding into more aggressive Wall Street activities, such as investment banking and dealmaking.
That dilemma came into sharper focus last month as BofA parted ways with its corporate and investment banking chief, Christian Meissner, who had held the role since 2010 — the same year Mr Moynihan took over. People close to Mr Meissner have blamed the bank’s increased caution for the decline that sparked to his departure.
The second-biggest US bank by assets has grown more cautious in recent months after senior managers launched an investigation into the $292m in losses it suffered on loans made to South African retailer Steinhoff and its billionaire chairman Christo Weise.
One senior banker says morale within the investment bank has been hit. “People don’t really understand what’s happened,” this person said. Mr Moynihan has delegated much oversight of the corporate and investment bank to chief operating officer Tom Montag. Bank of America declined to comment.
“We are not in an internal crisis,” but the departure of Christian and recent media coverage “haven’t been great for the bank,” one of the attendees at the strategy meeting in September said, while pointing out that BofA has had some successes, such as advising on Comcast’s £30bn takeover of British media group Sky this month. “We need to hunker down and get through.”
One particular problem executives have identified is BofA’s dealmakers failing to win M&A mandates from its top clients to which it has provided significant loans and other financing often at a loss or minimal profit for relationship reasons.
“What makes me apoplectic is when we extend a lot of balance sheet to a client, but still lose or share the advisory mandate with a boutique or broker-dealer,” a top executive said.
We’ve opted not to run the business on revenue or league table performance but rather for returns
Others point to the tribal management style of Mr Meissner and his investment banking head Diego De Giorgi, who both rose through the ranks at Goldman Sachs in the early parts of their career and at BofA have sidelined bankers who were not seen as loyal to them.
Speculation inside the bank has now shifted to further personnel changes. At the top of the list is Mr De Giorgi, who insiders say has rarely been seen in the bank’s offices in London and New York in the past 18 months.
Mr De Giorgi is not listed as a speaker at a gathering of top investment bankers at BofA set for next week, according to people with knowledge of its agenda. Mr De Giorgi declined to comment.
A top executive at the bank said the blame did not solely lie with Mr Meissner and Mr De Giorgi. Individual coverage bankers had to take their share of responsibility for missing deals in their sectors, while the bank’s slide down the league tables also reflected a decision to be more selective about clients, the executive said.
“We’ve opted not to run the business on revenue or league table performance but rather for returns,” the person added. “That’s what happens when you are more selective.”